EPISODE 044 : 01/13/2022
Robbie Kellman Baxter, Author
Robbie Kellman Baxter is the author of The Membership Economy and The Forever Transaction. She hosts the podcast Subscription Stories. Robbie has been focused on subscription and membership models for the past twenty years and talks to Spark Plug this week about the future of subscription and loyalty programs in retail.
Host: Ned Hayes and Ashley Coates
Guest: Robbie Kellman Baxter
Listen to every episode
Topics discussed in this episode
- The creator of the term “membership economy” explains how she came up with the term
- Membership and subscription models as super-powers for retail
- The history of recurring revenue models, from Blockbuster to Wal-Mart to Amazon
- Loyalty programs as a gateway to subscriptions
- How to launch, scale, and fit your product to the market, as seen in Baxter’s book The Forever Transaction
- How to reduce churn and turnover using a reliable business model
Watch Spark Loyalty’s Small Business Success Channel
Ned Hayes [00:00:01] Welcome to SparkPlug, where we talk to smart people working at the intersection of business and technology. Brought to you by SnowShoe your smarter loyalty leader today, SparkPlug is happy to have Robbie Kellman Baxter on. She is a consultant, she’s an author and speaker, she wrote The Membership Economy, and she wrote The Forever Transaction that just came out in 2020, and she has the podcast subscription stories. She has more than 20 years of experience providing strategic business advice to lots of organizations like Netflix and Microsoft and The Wall Street Journal and she’s been really focused on subscription and membership models for over 20 years. She has an MBA from Stanford and honors from Harvard, so it’s fantastic to have you here Robbie.
Ashley Coates [00:00:49] Rob, let’s start by having you tell us a little bit about yourself. You’ve a fascinating background.
Robbie Kellman Baxter [00:00:54] Yeah, sure. So in college, I studied poetry, so it was definitely a windy and circuitous path to get to the world of subscriptions. But I’d worked in strategy consulting and they told me, you know, you really need to go back to business school to round out some of the holes, things that you don’t know the answer to about, you know, how to do accounting and financial statements and things like that. So I went to business school five years working in product marketing, and then I got laid off while I was on maternity leave with my second child and I said, I need to be in control of my own career and for a while, I just did any kind of consulting and contract work that I could that used my skills; a little strategy, a little marketing, a little writing. If you want to be successful for the most part, as a consultant, you either grow a firm or you develop an expertise, and I chose the latter. Netflix is my fifth consulting client and I fell in love with the business model, and I just started researching and thinking about what it was that Netflix was doing that was so smart. And could other organizations also apply those same ideas?
Ned Hayes [00:02:01] So what originally fascinated you about the membership based idea, the whole subscription model?
Robbie Kellman Baxter [00:02:07] A couple of things, probably the first thing that attracted me was recurring revenue and high market valuations. I saw that what Netflix was doing was way more profitable, trying to keep finding that same customer and win them back over and over again. You attract the customer once in a subscription model and then you promised them something forever, which justifies subscription pricing, which means that they pay you on a regular cadence so you don’t have to keep going out and finding them and bringing them back to the store or back to your organization. And, you know, I was like, that is really powerful and then, you know, the human side of subscriptions and membership is very much about the promise that you’re making, that is, I am going to solve your problem on an ongoing basis, and you can trust me to do that forever therefore, you’re willing to pay me forever as well. So there’s kind of this side that the company is really trying to get to know the customer, understand their ongoing needs and develop solutions around that ongoing need, rather than kind of staying in that little pigeonholed space of selling widgets.
Ned Hayes [00:03:17] And I’m really interested in the fact that you came up with the term membership economy. How did that term arise? How did you come about to use that term?
Robbie Kellman Baxter [00:03:26] Yeah. So my friends at Zawara, you know, they use this term subscription economy, which is great, and there’s a lot of value to that. But for me, what I feel like is lacking is the concept of the trusted relationship. For me, subscription is a pricing decision, membership is a mindset, and the only way that you can justify charging on a subscription basis is by treating your customer like a member. I first started working with Netflix over 20 years ago now, but I started seeing companies across different industries applying that same concept of what would it look like if instead of focusing on building products and then marketing them, what if we focused on solving an ongoing problem for a particular customer and then continuing to evolve and improve the offering to support that relationship? So that’s kind of where that idea came from and I even say to organizations, you know, if you’re listening to this and you’re thinking, you know, oh, she’s a subscription person, I’m never going to have subscriptions at my organization. That’s OK. Try just treating your customer like a member and focusing on their long term goals, and you’ll see your recurring revenue, your repeat business start to rise even if you don’t do subscriptions.
Ashley Coates [00:04:43] And so you mentioned that Netflix is really where you began to fall in love with the subscription based model. Can you tell us more about that experience and why this model is so successful for that company in particular?
Robbie Kellman Baxter [00:04:55] Yeah, sure. So the Netflix story is widely reported and today people will say to me, you know, I know you worked with Netflix, but we’re just getting started or we’re a small company or we’re a nonprofit or we’re in the physical product space, not the subscriptions or we’re a chain of grocery stores or clothing stores, and this doesn’t apply to us. But what I think people forget is that when Netflix was starting, they were the David, not the Goliath, right? I started working with them right around the time they went public. We didn’t even have a footprint across the United States yet, Blockbuster was huge at that time, Wal-Mart had just gotten into online subscriptions of DVDs where you could get the DVDs in the mail and actually drop them off at Wal-Mart, which many people thought was a better model at that time. And what I loved about Netflix was that they were doing one thing really well, they did not get distracted by every shiny new opportunity that came their way. They were like, we’re going to provide professionally created catalog of video content delivered in the most efficient way possible, that was DVDs, today that’s streaming with cost certainty, meaning no late fees, no usage fees, no secret fees. You know what you’re going to pay every single month. And what I loved about that model and what I thought was really interesting was one that focus on doing one thing really well. You know, at different times people said, hey, what if you put your gift cards into one of our gift baskets and we sold it by the month? What if we said that you can get a cheaper price if you did it by the year? What if we also did video games and you incorporated those? What if we also sold movies? And they said, “no, that’s not our business model. This is our business model. This works. This aligns our goals with the customer’s goals and the metrics they used aligned with that.” So at that time, most businesses were really focused on acquisition and really focused on quarterly revenue and not very focused on those other metrics that really drive, I think, the health of your business return visits, for example, lifetime customer value, engagement, how often do they come to visit? Do they preference? Do they come to you first to solve their problem for professionally created video content? Most people, certainly in the early years, but I would say even today, go to Netflix first. If they want to watch something, they look at Netflix first and only if Netflix doesn’t provide it did they go elsewhere. Same thing with Amazon. Very different model, but you go there first, especially if you’re a Prime member to look for whatever it is you need. And if they don’t have it, then you go, look somewhere else. And that’s the kind of loyalty that Netflix was able to drive and that I see with a lot of these other organizations as well.
Ashley Coates [00:07:34] Thank you, that’s fascinating to hear about. One question I was really curious to ask you about is the evolution of the public perception of memberships and subscriptions over the years. Just as a little background, I used to work at a regional theater during the 2010s, and it had been a theater’s heyday in the past have been all about subscribers, and we were finding that younger theater goers really weren’t interested in being subscribers that that we kind of thought that that model was dead. And I’m curious if you think that it’s been a resurgence in the last few years with companies like Netflix.
Robbie Kellman Baxter [00:08:11] Yeah, it’s really interesting. In my recent book, The Forever Transaction, I broke down the different businesses by stages, maturity model businesses that are just launching subscriptions, businesses that are scaling their subscription, and businesses that have had a subscription for a long time that need to stay current. And I would put regional theaters into that last bucket for the most part, they’ve been doing subscription for a long time. Also in that bucket, our gyms, professional associations, newspapers, magazines, they’ve all been doing subscription for a long time. And if you talk to people who’ve been in those spaces for a long time, continuity programs, you know, as seen on TV, but wait wait, there’s more. A lot of those groups would say we’ve been doing subscription a long time and we’re seeing a drop off. We’re seeing that it’s not what people want, and I would put forward that it’s not that people don’t want subscription, it’s that they don’t like subscription the way you’re selling it. So in other words, the bundle of benefits in the pricing doesn’t make sense to me. So if you’re designing a subscription, you want to think about what is the promise we’re making? So the most meaningful way that you can enjoy local entertainment or a great way to feel more cultured and connect with other cultured people or whatever your promise is, it’s rarely just about the product, the shows. It’s often about things that go around it, but a lot of organizations are like, they start with that idea in mind. We want some culture in our town, let’s open a theater but then they quickly move to we’re in the business of doing productions. Which ones are we going to do? And they kind of forget why they wanted it in the first place. I don’t want to pick on regional theater. I love regional theater, but let’s talk about newspapers, right? 50 years ago, if you wanted to understand the world around you on a daily basis, right? It was almost impossible that you can get that kind of information from a location that was further away than a three hour truck drive. Right, because the newspapers had to be printed somewhere and then they had to be delivered to you, that was the only way to get the information. And so we ended up with newspapers that have a national section, a local section, a politics section, an entertainment section. Those are kind of going the way the dinosaur for the most part, because on one end, you can get national news from really excellent national news sources digitally immediately. And on the other end of the spectrum, you can get hyper local news and information immediately and digitally. So these kind of bundled benefits that we’re in the middle of these local and regional newspapers are no longer the best way for most people to get the news about the topics that are important to them living their best lives.
Ned Hayes [00:10:43] That’s really insightful. Thank you. So I’m an author myself, and I know some of what it takes to write a book. I’m really curious how long it took you to write The Membership Economy and what was the genesis of that book? How did you come about writing the book?
Robbie Kellman Baxter [00:10:59] Well, so I first started thinking about writing The Membership Economy in around 2004. So right around the time I was finishing up my work with Netflix and I was working with Intuit at that time on pay cycle, which is their small business, subscription based payroll system. And I work with Oracle on the B2B side. I was working with SurveyMonkey and I was like, “there is something here and I should write a book about it.” This is like 2004, and the book didn’t come out until 2015, right? So it took me a really, really long time to get clear on what this thing was, it was really messy for me. I wanted to have frameworks that were neat and that were applicable really broadly. People were calling me saying, “Hey, we wanted to be the Netflix of newspapers, bicycle parts, lingerie stores, you name it.” Somebody wanted to be the Netflix of it. And I would ask people, “What does that mean for you?” You know, Electronic Arts, what does it mean if you say you want to be like Netflix, but for EA, what does that mean? Well, for them, it meant having a catalog of their frontline content in subscription and that those people were also going to be buying some of their games. So a hybrid model, very different actually than what Netflix does. So I was like, Well, why is that like Netflix and how is it different from Netflix? And what are the shared attributes and how can I help the most people in a single book? So it took me, yeah, it took me 11 years to get it out to the public. Well, after one year of real writing, it’s 11 years of note taking and agonizing.
Ashley Coates [00:12:29] Right, well, so you talk about this idea of recurring payments versus single payments, and I’m curious where those ideas are most applicable. Can any business adopt this to a degree?
Robbie Kellman Baxter [00:12:41] Yeah, I think any business can benefit by taking a step back and saying, what is the forever promise that we could make to our customers? Or even better, what is the journey that my customers on that made them come to my store? What role do I play in that bigger ongoing goal? And how could I play a bigger role? And then you say, could that bigger role justify subscription revenue? So that’s kind of the journey. For example, I used to give, you know, if you sell wedding dresses, you can’t have a subscription, right? Because most people don’t need unlimited access to wedding dresses forever, right? Hopefully, you’re only going to wear it one time. But if you say, well, why do people come to me? You might either say, Well, people come to a wedding dress store because they want to have a great marriage, right? They want to have a great celebration to kick off their marriage because their marriage is important to them. So you could see how they could evolve that into some kind of a subscription based marriage or even subscription based wedding planning, right one year versus hopefully 50 or 75 years of runway. Or they could go the other way and say, I go to the wedding dress store because I want to look amazing on an important day and then you get into the rent the runway model. Right? Two different promises. One about your marriage and your wedding, and one about how you look, how you dress either one of those, you know, if you owned a wedding dress store, you could go in either of those directions and build some recurring revenue. And that’s kind of true for any business, if you’re part of somebody ongoing goals, you can probably design a subscription around it.
Ashley Coates [00:14:13] Those are two really great examples, rent the runway versus a wedding dress shop. Are there any other types of businesses that you’ve worked with and maybe move them from a single payment to a recurring payment structure that has presented a really big challenge for you, but you were able to kind of move them to that model?
Robbie Kellman Baxter [00:14:32] Well, every business that moves to subscription has their own challenges. So a couple of examples if you sell physical products like cars, right? The question is if I’m moving to subscription and I’m an automotive manufacturer, what can I do? Well, you could sell something around the car, write a subscription that gives you maintenance and support and rentals when you’re out of town and other things kind of focused on getting the most value out of being a Volvo driver or a person that goes to Baxter Auto Dealership, right? Or you could say the car itself is what you’re getting access to, you don’t buy the car, you access the car. So that’s what Porsche is doing, you actually subscribe to their fleet through Porsche Drive used to be called Porsche Passport, and so you can drive a convertible one week and an SUV the next week because there it’s about I love Porsches, but I don’t love just one you know, I care a lot about the right car for the right occasion. Different promise than what Volvo does, where they kind of give you everything around your car. So that’s an example of, say, it’s tricky. Another one that was tricky. I’ve worked with several businesses, a lot of them in the sports world, but also some with series content where they have an off season. I always talk about trying to create habits, but if you have, let’s say, a baseball team, season tickets only go for part of the year, right from spring to fall. So what do you do from fall to spring? And so thinking about how do you keep somebody making it a habit all year round becomes really tricky. Same issue with your regional theater example. Another one that’s hard is what we just talked about, which is you’re used to selling a widget and now how do you say I’m solving an ongoing problem and you have to kind of think that through all of those are just kind of brainstorming, figure it out, logistical issues, but the hardest one is when the boss wants recurring revenue, but isn’t willing to change the culture to focus on lifetime customer value, to focus on keeping that customer for the long term. And this happens a lot when a lot of times CEOs are given a big bonus for hitting a quarterly or annual number. And so they’ll do things to hit that number that actually make it harder to build recurring revenue in the future, like hiding late fees, for example, or making it hard to cancel, because they’re trying so hard to hit that number and then they kind of leave a mess for their successor. So when I’m working with companies, one of the first questions I ask is how big a priority is subscription in your leadership team? Is it a top three priority? And do you understand that it’s going to take a while before this pays off? And if they kind of push back on either of those, I suggest that they not do subscriptions at this time.
Ned Hayes [00:17:09] Right? So the way you’re describing subscriptions and memberships, it sounds a lot like loyalty. So how do these models differ really from a loyalty program where you accumulate points over time?
Robbie Kellman Baxter [00:17:22] Yeah, so loyalty programs were kind of a gateway for a subscription. They were trying to accomplish some of the same things, which is preference, really preference and trust. Right? I go there first and only if they can’t take care of me do I go somewhere else. But what they’ve really evolved to is much more of a financial transaction. I know that I get discounts and product in exchange for the frequency and depth of my spend with that organization, which is a financial transaction. If I do these things, I get a discount. It has nothing to do with how I feel about the organization. And in fact, in most cases, I don’t even have to have a preference because my wallet is full of hospitality cards and memberships in every airline that I fly, memberships with every hotel that I visit, memberships with any restaurant that I go to, doesn’t say anything to me about loyalty. In fact, if you looked at my wallet, you’d say you don’t look like you’re loyal at all. You look like you understand that you get a discount for every 100000 miles you fly. So what I see happening in loyalty is organizations rethinking what it means to build loyalty. So I think Amazon has, of course, pushed the thinking quite a lot. Costco also has pushed the thinking by saying, for us, loyalty is something that you pay for in advance because this is a place you want to prefer that you do prefer, so you’re going to pay to get certain privileges rather than earning privileges by buying a lot, which is really just a financial transaction. So those are kind of I call premium loyalty programs and for me, that’s more of the future. And that is a better way to get people thinking about how do we build trust and preference.
Ashley Coates [00:19:05] Well so you talked a lot about having a long term vision and plan for a subscription model and needing to build that long term trust over time. How do businesses engage with their customers after they win the subscription to build that trust?
Robbie Kellman Baxter [00:19:20] So the number one thing that you can do to build that trust is in the seconds minutes, days after somebody transact with you. This is whether or not your subscription business you want to onboard them, you want to do three things. You want to make sure that they get the value that they came for in the first place. So if they bought a new car, you want to get them on the road with the wind in their hair, right? Having a good time. When I’m signing up for Spotify, it’s probably not because I have a lot of free time and I figure I might as well do that. It’s because I have friends over and I want to get music playing right, so get me to the value as quickly as possible. Number one. Number two, reinforce the wisdom of my decision. You shopped here, you signed up for this subscription. That’s really smart. You’re going to save money. You’re going to get access to more value, you’re going to connect with better people because you’re part of us. And the third thing is, and this is the onboarding piece is demonstrate to them how they can get the most value that they’re entitled to. So back to this car example, if I buy a Lamborghini and I drive it off the showroom floor, I keep it in first gear all the way home, limping along on the highway, in the right lane or in the shoulder. And I say, this is a terrible car. It doesn’t go fast at all. That’s my problem, because already paid them. But if I’m subscribing and I say I subscribed, it’s because I want it to go fast and this car isn’t going fast for me. I’m going to cancel my subscription. So suddenly it becomes very obvious that the responsibility belongs to the dealer or the manufacturer to make sure that, you know, dumb Robbie, who’s keeping the car in first gear, doesn’t feel dumb and gets the car into a higher gear, so she gets the value. So what that means is in those early seconds, minutes, days after someone joins signs up comes into your store, you want to show them how they can get the most value. Our best customers come twice a year when we have our special sale. That would be kind of an old fashioned approach to that. In a subscription world, you might say our best subscribers connect our apps with your smart TVs so that you can enjoy on the big screen all your sporting events. So really thinking about those things, making sure that they get the value they’re entitled to, watching their usage, seeing if the habits are being formed right away because by the time they cancel the subscription, it’s too late to save them. It’s much easier to save them by getting them to form habits early than it is to get them to form those habits later when they’ve gone months and months without getting value.
Ned Hayes [00:21:48] I’m struck by your use of the term value and the fact that when you have a loyalty model or a membership model that really allows the customer to actively participate in the business, then they feel that the business is much more invested in their success. Is that true?
Robbie Kellman Baxter [00:22:06] Yeah, absolutely.
Ned Hayes [00:22:08] Right.
Robbie Kellman Baxter [00:22:08] It’s about aligning goals.
Ned Hayes [00:22:11] Right, so it also sounds like speaking of value, that if you over complicated, if you add, you know, additional fees, late fees, whatever, you’re actually adding friction to the process of creating a relationship with your customer. Right?
Robbie Kellman Baxter [00:22:23] Yeah. Yeah, absolutely. It’s I mean, the reason that you have late fees, you know, go back to the Netflix example is because the organization is structured in such a way that if your customers holding onto a DVD, that means somebody else can’t get it so you’re trying to punish them because your models that fit your model doesn’t align your goals and their goals. And I think with each element that you add in your pricing structure, whether it’s a late fee or a tier, you know, people have those 3, 4 or 5, 12, 15 tiers or different offerings, plus bolt ons like, oh, and if you want that, that’s extra, and if you want that, that’s extra. And if you go above this usage, that’s also extra. And suddenly you end up with a 3D or even 4D pricing structure with late fees and service fees and special fees and different options. And when you have that, you’re forcing your customer to become an expert on your pricing model when, as you said it creates friction, it slows them down, it makes them think it makes them keep their consumer hat up where they’re considering options and they’re trying to get really smart about what you’re doing. It’s very adversarial, too, because I’m like, I have to pick the right pricing structure so that I don’t get taken advantage of. And if I feel like that, how am I ever going to relax into the relationship and trust you, right?
Ned Hayes [00:23:36] So I very much understand it’s about value. It’s about trust. But if there are a lot of companies doing this, how can a subscription or membership based company compete when there are a lot of other companies doing the same thing? What are the tricks kind of make yourself stand out?
Robbie Kellman Baxter [00:23:52] Yeah. Well, first of all, you don’t want to do the exact same thing. I mean, that’s that’s rule number one of business. You know, marketing can say it’s differentiated, but the product actually has to be differentiated. So that’s kind of a starting point. And what I advise most organizations to do is especially when you’re starting out, you may envision world domination at some point down the road. But as a starting point, think we’re going to take care of this small segment and we’re going to optimize for them and then over time, we’re going to layer in more benefits that make us relevant to additional segments so that our total available addressable market goes. But start small and really nail it and make sure, too, that you’ve designed your products and services, not just for acquisition new and improved joint now, but also for engagement and retention. So you want to understand why are they signing up, but you also want to understand why would they stay?
Ashley Coates [00:24:45] Thank you, Robbie. So I’d love to also talk about your new 2020 book The Forever Transaction. You’ve mentioned before that this book is more about how to versus your prior book, which is about creating memberships as a whole, so there are so many companies now doing subscriptions. How does a company start? How does a business start? A subscription model?
Robbie Kellman Baxter [00:25:08] Yeah, so The Forever Transaction breaks up in three parts. How do you launch your business? How do you scale it? Once you’ve figured out product market fit and then how do you maintain leadership status? So when you’re starting a subscription business, let’s say you’re starting totally clean slate, you have no business right now and you’re designing something from scratch. You want to start by saying, who am I making a promise to? And what am I promising? So who’s your ideal customer, ideal member and what is the ongoing forever promise you’re making to them? That’s the nut that you’re building everything around. Then the next thing that you do is say, what would that look like if it were fully formed? So if I’m Amazon, when they’re starting out right, they’re saying we want to remove all friction from all buying processes that is so grandiose for all shoppers everywhere, right? It’s so grand. So big, right? That vision is almost as if they remove all friction. Well, that should be that. I think, Oh, I really like Ashley’s glasses and then before I’ve even finished thinking that thought the glasses are on my face with my prescription, I look in the mirror and say, oh, actually, they don’t look as good on me as they look on her and they disappear. That would be friction free, that’s where Amazon’s trying to go. But then they pulled all the way back, they started much more modestly with getting you whatever book you wanted, not even in two days, but in the beginning it was like, you have to wait three weeks to get the book you wanted. And so they were just focused on book lovers just in the U.S. And over time, they’ve layered in more benefits and they’ve been able to reach more people. So that’s really what you want to do is start with that small nub, but be really clear on the promise. And then once you have product market fit, that’s when you invest in infrastructure, technology, operational efficiencies and so on. But the first thing is really to just figure that out.
Ned Hayes [00:26:50] So the way that you get to success is by really focusing on that forever promise and building loyalty and trust. Is that what I’m hearing?
Robbie Kellman Baxter [00:26:58] Yeah, yeah, absolutely. It’s all about trust.
Ashley Coates [00:27:01] Well, so where have you seen failures when subscription models and if you could, can you speak about what it takes to succeed after a company might have a large membership loss? And what are some of the reasons that people cancel the membership?
Robbie Kellman Baxter [00:27:16] So people cancel for all kinds of reasons, and I think the number one thing to do is to understand, like if you have a going concern, you have a subscription or membership model and it’s not going as well as you want. It’s a couple of things. One of them is you want to think of it as a party and you say, OK, if the party is not performing as well as I’d like it to. What’s the problem? Is that the people don’t know about the party? That’s an awareness problem. Is it that they peak in the window of the party and they say, well, those people are too cool or they don’t look like they’re having fun, it doesn’t look relevant to me. That’s a relevance problem. It’s a communications problem. Or it might be a product problem like they might be right then if they actually come inside to the party and nobody welcomes them and nobody shows them the stairs that lead to the buffet and they leave and they say that was a terrible party, there was no food. And you say, didn’t you see the stairs? Go downstairs, there’s so much food; that’s an onboarding problem. And if they say I was at the party for a while and it was really fun, but then it got boring because we were coming every week, that’s a product problem. You don’t have enough variety or enough features to make it relevant over time. And if they say I went to the party and there was no food on the buffet table and you couldn’t hear the band because the speakers weren’t working, that’s a product problem, that’s an operational issue. And so first thing you want to do is understand why people are leaving. And is it a communications problem where I came in and it wasn’t the kind of party I wanted. I thought that you were going to have anime, but you only have kiddy cartoons, that was not what I thought when you said the best hand-drawn cartoons, I didn’t think it was going to be for my four year old if I was going to be for me. That’s communications problem. I signed up for your subscription to access soccer matches, and the technology stopped working in the middle of the game at the most exciting moment. It was really embarrassing because I was having a party and invite all my friends to watch, that’s a product problem. So you have to really get clear on what the problem is. That is driving churn. And a lot of people don’t know what’s driving their churn and they always say cost too much, or it’s corollary. I just didn’t use it, even though it’s amazing. I love your magazine, but I just never get to it, that’s a nice way of saying I don’t like reading your magazine, that’s why I canceled. So really important to get beneath that first polite layer of why somebody left and to really understand what was the problem and then decide, where do I want to invest in strengthening my model?
Ned Hayes [00:29:38] Well, if you do strengthen the model, how do you build on that to build kind of an ongoing relationship with the customer so that they will continue for years and years with you?
Robbie Kellman Baxter [00:29:47] So the first thing is you want to think about not just the acquisition benefits, but also the benefits that are going to keep them and make it a habit. So you want to think about how do I onboard them so that they relax into the relationship and say, this is I’m going to solve my ongoing problem, whether that ongoing problem is I always want to look my best or I want to have access to the best information about a subject matter that I care a lot about, or I always want to drive a new and fun car or whatever that promises is, I think that’s really where you want to start.
Ashley Coates [00:30:17] Well, so let’s also talk about retaining members during a pandemic. Many people reevaluated their budgets last year, and for many people, saving money included cutting membership costs, monthly membership costs. So I’m curious how brands have positioned themselves during this time, especially if they may be considered non-essential to their customers.
Robbie Kellman Baxter [00:30:40] Yeah. Well, so first of all, what we saw at the beginning of the pandemic was that most subscriptions either grew or stayed flat in terms of the number of subscribers. In contrast, a lot of non subscription businesses really struggled. So that’s sort of the first thing to really understand. And a big part of that, a couple of things, one is people are less likely to cancel than they are not to make a proactive purchase, so that’s helpful. Second thing is, the nature of subscriptions is at that consumer moment, they’re saying, if this company can solve my ongoing problem, I am going to stick with them forever. So they’ve already made that decision. So when they have a subscription, it’s probably because they know what it is and they know they’re going to want it for a long time. When you say non-essential and there’s lots of different categories of people. But when you talk about things that are non-essential, a lot of times that’s people who don’t have the money in their, you know, suitcase of money, they truly can’t afford it. Of course, they’re going to get rid of non-essential things. But data shows that it’s not usually like things like streaming content or DoorDash, which most people would say were not essential at all. Those businesses actually did pretty well in the pandemic. And so really understanding what people expect from you and what they need from you and optimizing around that if it’s I subscribe to you because I want to do a good job at work. What that meant changed a lot when we all stopped working in the office and started working at home. The organizations that were able to figure that out really quickly were the ones that grew really fast during this time. The other thing that I would say is that a lot of companies during the pandemic that did not have subscriptions suddenly wanted subscriptions because they saw how resilient the subscription model was. And a lot of people called me and said, Hey, can you help me get subscription revenue quick? Quick subscription revenue doesn’t come quick, quick. It comes slow and steady. And so while I applaud the many businesses that have finally gotten serious about subscriptions and kind of invested in customer centric business models, I think a lot of them dove in quickly, didn’t really understand what they were trying to do, and then failed because they didn’t think this is what I’m going to do so I don’t get into this problem again rather than this is how I’m going to solve my Q2 problem.
Ned Hayes [00:32:52] So it’s a different mindset regarding how people move forward with the membership world.
Robbie Kellman Baxter [00:32:57] Yeah, yeah, absolutely. It’s a very different model. It’s it’s a golden goose kind of model.
Ned Hayes [00:33:01] Right, so you’ve been an author in this field and expert for quite a while. I’m curious if you think there are some ideas that haven’t been covered adequately, what books should be out there that aren’t yet written?
Robbie Kellman Baxter [00:33:16] So if I were going to write a book in this space, I would expand on the chapters that I wrote in The Forever Transaction about culture, culture for lifetime customer value, helping people connect the dots. We’re all seeing that businesses have subscription revenue, are getting higher valuations in the public markets, and also more interest from private equity investors. But what people sometimes forget is that the reason is that predictable revenue is really valuable. And the way you get predictable revenue is by running an organization that’s optimized for that instead of an organization that’s optimized around, you know, quarterly capitalism. And to do that, you need a different kind of organizational structure. You need different skill sets, you need different metrics so people need to get a bonus on retention numbers on maybe engagement in the first month numbers instead of Q2 revenue. And so if I were going to write another book, that’s probably where I’d go. But to be totally honest, there’s a lot of really good books out there right now about subscriptions and membership and pricing for loyalty.
Ashley Coates [00:34:23] Well, thank you so much, Robbie. This has been such an insightful conversation, and we really appreciate your expertise in this area. We have one last question for you, which is what is your legacy and what do you hope to further accomplish in your career?
Robbie Kellman Baxter [00:34:38] That’s a great question. I hope when I, you know, I don’t think I’m going to retire, probably till I die, because I like to work too much, I just enjoy that feeling of being productive. But I hope that people say Robbie gave more than she got. Robbie helped me build a business that I was proud of and that both really helped customers and we got fairly paid for it. I think that’s probably what I would ask for.
Ashley Coates [00:35:03] That’s fantastic.
Ned Hayes [00:35:04] Well, great to chat with you today. Appreciate your time.
Ashley Coates [00:35:07] Thanks Robbie, that was great. Thank you.
Robbie Kellman Baxter [00:35:09] Yeah, it was a real pleasure. Thank you so much for having me.
Ashley Coates [00:35:12] Thanks Robbie
Ned Hayes [00:35:17] SparkPlug is a wholly owned property of SnowShoe, all content and copyright 2021 SparkPlug Media.